April 23 (Bloomberg) -- At least one in four Paris
apartments listed by realtor Agence Etoile can’t be sold, even
with mortgage rates at record lows, as buyers and sellers fail
to agree on price, the company’s director said.

“I have some inventory that’s too expensive and sellers
don’t want to lower prices,” Christine Perrissel said in an
interview. “Buyers are just much more selective.”

Across France, an economy that’s stalled for two years,
joblessness at a 15-year high, property prices near record highs
and new taxes have made households reluctant to borrow to buy
homes. While Europe’s debt crisis prompted banks to tighten
credit, since the start of this year they’ve offered more
attractive terms to lure customers and meet lending targets,
after borrowing plunged in 2012.

The average home-loan rate fell 0.8 percentage point from a
year ago to a record low 3.34 percent in the first two months of
the year. Still, new mortgages granted in the 12 months through
February slid 27 percent from a year earlier to 98.4 billion
euros ($129 billion), according to the Bank of France.

New home sales fell 18 percent in 2012 to 77,900. Existing
home sales declined 12 percent to 709,000, with the drop
worsening to 22 percent in the year to February. The average
housing investment funded with loans represented 3.73 years of
the buyer’s income in March, the lowest since January 2010, a
study by lender Credit Logement SA and polling firm CSA shows.

Hollande Taxes

The data show that as rates fall, the market still hasn’t
fully shaken off the gloom of 2012, when real estate purchases
plunged as banks tightened mortgage lending and after former
President Nicolas Sarkozy and his successor Francois Hollande,
elected in May, added property taxes to cut the country’s
deficit.

Hollande, the first Socialist president in France since
1995, has called on those “with the most to show patriotism”
in tough times. He’s raised income taxes, those on capital gains
from property, as well as wealth and inheritance levies. That
prompted Gerard Depardieu, who played Obelix in films about one
of France’s most beloved fictional characters, to move to
Belgium.

“We’ve had a catastrophic start of the year in January and
February with the tax squeeze,” said Marc Julien, founder and
chief executive officer of Pierre Invest, a broker specializing
in new properties for the Paris region, referring to the
property taxes.

Sweetened Terms

March and April saw some improvement as banks and real
estate companies offered sweetened terms, he said. Julien, who
was at a property trade fair this month, said he’s giving up
half his commission to pay for kitchens and waiving transaction
fees for each contract signed at the event.

Still, 52 percent of banks said demand for housing loans
dropped in March, when some lenders tightened requirements
slightly, according to a Bank of France survey published on
April 11. Some banks increased margins on the riskiest loans.

“Banks remain cautious in granting loans because of
unemployment and the start of a price decline,” said Sandrine
Allonier, head of economic studies at online credit broker
Meilleurtaux.

French home prices, which surged 163 percent in the past 15
years, have slipped 2.9 percent from a peak in 2011, according
to the national statistics office Insee.

Banks are still “competing strongly to lure the best
borrowers,” Allonier said, adding that lenders may make it more
attractive for such property buyers. “Banks still have room for
maneuver and mortgage rates can fall lower,” she said.

More Liquidity

Liquidity at banks was bolstered after the European Central
Bank plowed 1 trillion euros into the financial system through
cheap three-year loans in December 2011 and February 2012.

The French 10-year government bond yield, a benchmark for
home loans, fell to 1.704 percent at 12:57 p.m. in Paris, the
lowest since Bloomberg began compiling data on the securities in
1990. The previous record of 1.709 percent was set on April 8,
four days after ECB President Mario Draghi said policy makers
“stand ready to act” to bolster the region’s flagging economy.

Banks “are making hefty margins at the moment, so they’re
asking for more production as funding conditions are even more
favorable,” Philippe Taboret, deputy CEO of Cafpi SA, France’s
largest mortgage broker, said in an interview. “Each week,
we’re hearing ‘we must lend, last year was a bad year.’”

The average term of home loans in March averaged 205
months, about 17 years, up from a seven-year low of 199 months
in January, when rules were tightened on tax write-offs for
investment properties and interest-free loans for first-time
buyers, according to the CSA-Credit Logement study.

Purchasing Power

“Lowering rates and extending durations are ways to
provide extra purchasing power,” Cafpi’s Taboret said. Lenders
including Caisse d’Epargne and BNP Paribas SA “are very willing
to lend,” while Societe Generale SA is more reticent, he said.
Banks are coming up with one-off discount offers, while stopping
short of a rate war, he said.

Joelle Rosello, a spokeswoman at Societe Generale, declined
to comment. The bank’s lending unit didn’t have a stand at this
year’s property fair. Caisse d’Epargne, which is offering 20-year fixed-rate mortgages at 2.95 percent, advertises its policy
with a poster asking: “Who says the credit tap is closed?”

Banks are seeking long-term customers through their home
loans, Meilleurtaux’s Allonier said. First-time home buyers may
make renovations, buy insurance, cars and open up savings
accounts, she said.

Best Clients

“The best clients, such as households with annual income
over 60,000 euros and 15 percent down payments, can get an extra
discount of up to 0.4 points and borrow at 2.7 percent over 20
years, ” Allonier said.

“Markets are excluding the most fragile first-time home
buyers as subsidies have been trimmed and amid unemployment
concerns,” he said. “For good clients, banks won’t hesitate a
second to fund even 100 percent of the property value, even over
30 years.”